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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The output where ATC is minimized and economic profit is zero






2. Exists if a producer can produce a good at lower opportunity cost than all other producers






3. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






4. AFC = TFC/Q






5. The lost net benefit to society caused by a movement away from the competitive market equilibrium






6. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






7. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






8. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






9. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






10. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






11. Demand for a resource like labor is derived from the demand for the goods produced by the resource






12. Ed = 1






13. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






14. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






15. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






16. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






17. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






18. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






19. The ability to set the price above the perfectly competitive level






20. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






21. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






22. The change in quantity demanded resulting from a change in the price of one good relative to other goods






23. The sum of consumer surplus and producer surplus






24. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






25. The imbalance between limited productive resources and unlimited human wants






26. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






27. Models where firms agree to mutually improve their situation






28. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






29. All firms maximize profit by producing where MR = MC






30. A firm that has market power in the factor market (a wage-setter)






31. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






32. Entry of new firms shifts the cost curves for all firms downward






33. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






34. Total product divided by labor employed. APL = TPL/L






35. Models where firms are competitive rivals seeking to gain at the expense of their rivals






36. MUx / Px = MUy/Py or MUx/MUy = Px/Py






37. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






38. Costs that change with the level of output. If output is zero - so are TVCs.






39. The additional benefit received from the consumption of the next unit of a good or service






40. A good for which higher income decreases demand






41. Two goods are consumer substitutes if they provide essentially the same utility to consumers






42. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






43. AVC = TVC/Q






44. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






45. Ed = 8 - infinite change in demand to price change






46. 0 < Ei < 1






47. The mechanism for combining production resources - with existing technology - into finished goods and services






48. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






49. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






50. The additional cost incurred from the consumption of the next unit of a good or a service